Big Tobacco ordered to pay full $800 million to New York under landmark 1998 agreement

by jmaloni

Submitted

Sat, Sep 14th 2013 01:15 am

Attorney
General Eric T. Schneiderman announced this week a panel of arbitrators threw
out Big Tobacco's $800 million claim against New York and instead ordered the
companies to pay the state more than $92 million that they had
withheld from their 2003 annual payment due under the 1998 landmark tobacco
master settlement agreement. The panel of three retired federal judges - Fern
Smith, William Bassler and Abner Mikva - rejected Big Tobacco's demand for a
dramatic reduction in its annual payment to New York, finding instead the state
had fully complied with its agreement obligations and was entitled to its
entire payment. This precedent-setting decision is expected to protect the state
from many billions of dollars in future claims.

"This
ruling is a huge victory for all New Yorkers, and I applaud the panel for
denying Big Tobacco's efforts to avoid responsibility for illnesses caused by
cigarettes - and paid for by taxpayers," Schneiderman said. "Big Tobacco
companies contribute to the deaths of thousands of people every year, in large
part by luring more and more young people onto cigarettes. Finally, these
companies will be required to reimburse the state for money spent treating New
Yorkers made ill by their deadly product."

Under New
York's escrow statute, only sales of cigarettes on which New York state excise
taxes have been paid trigger the escrow requirement. However, for more than 50
years, with the full knowledge of the participating manufacturers
("PMs") and specifically up to and including 2003, New York did not
require state excise taxes to be paid on cigarette sales to or on Indian
reservations. Consequently, the state did not seek to have non-participating
manufacturers ("NPMs") make escrow deposits for their untaxed sales
in the state. In rejecting the tobacco companies' claims, the panel fully
recognized New York's long-standing policy of not taxing cigarette sales on
Indian reservations.

The case
was handled by a team of lawyers from the tobacco compliance bureau headed by
Assistant Attorney General Louis Willenken, together with Assistant Attorney
General Sarah Evans and Bureau Chief Dana Biberman, under the supervision of
First Deputy Attorney General of Affirmative Litigation Janet Sabel.